How Do You Trade a Double Top Chart Pattern? - Analysis of Double Tops Chart Pattern
To analyze the double tops chart patterns a trader needs to first learn about the technical analysis of double tops chart patterns explained below.
Double Top Trading Pattern
Double tops forex pattern is a reversal pattern which forms after an extended upward forex trend.
As its name implies, this double tops chart pattern formation is made up of two consecutive peaks on the forex chart that are roughly equal, with a moderate trough in between the 2 peaks.
Double tops forex pattern formation is considered complete once price makes the second peak and then penetrates the lowest point between the highs, called the neckline.
The sell signal from this double top pattern formation occurs when market breaks-out below the neckline.
In Forex, this double tops chart pattern is used as a early warning signal that a bullish Forex trend is about to reverse.
However, double top pattern is only completed once the neck line is broken and the market moves below the neckline.
Neck Line is just another name for last support level formed on Forex chart.
Summary:
- Double tops pattern forms after an extended move upwards- upward forex trend
- This double tops chart pattern signal indicates that there will be a reversal in the forex market trend
- We sell when price breaks-out below the neck-line: as described on the example below.
How Do You Trade a Double Top Chart Pattern? - Analysis of Double Tops Chart Pattern?
Double tops forex pattern look like an M-Shape pattern, the best reversal forex trading signal from the double top pattern is where second top is lower than the first top as shown & illustrated below:
This means that the reversal forex signal can be confirmed by drawing a downward forex trend line as shown below. If a trader opens a sell trade using this double tops reversal signal the stop loss will be placed just above this downwards trend line.
How to Trade the Double Tops Chart Pattern - How Do You Analyze a Double Tops Chart Pattern?
